Monday 14 May 2012

Next Left is closing down...

With the launch of our new Fabian website Next Left will be closing down soon...

But don't fear! This new site includes our new online version of the magazine Fabian Review where we'll be publishing political news, policy analysis, book reviews and Fabian history as well as featuring contributions from Fabian Society members.

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Wednesday 21 March 2012

Budget 2012: The conclusions...

Andrew Harrop, General Secretary of the Fabian Society, gives his response to the chancellor's budget statement this afternoon

This is a budget of reheated Thatcherism.

The Chancellor has unveiled a £5,000 annual Easter present for anyone earning a quarter of a million pounds, while keeping quiet about his real-terms cuts to tax credits and the minimum wage.

From next year the Budget’s headline tax giveaway, the increase in the income tax Personal Allowance, will spread £3.3 billion between rich and poor alike. But by then tax credit payments will be £2.5 billion lower than under Labour’s plans. Add to that Monday’s announcement that the Minimum Wage will rise by far less than inflation (again). Following this week’s announcements most low earners will lose more than they gain, just as the super rich see their income tax slashed. 

Britain is becoming a more unequal country under Mr. Osborne.

George Osborne tried to justify his embarrassing cut of the 50p rate with new wealth taxes. It is far from certain that they will raise the revenues he hopes for, but even on his own estimates they amount to barely half a billion pounds. Compare that to the £7 billion Osborne will have slashed from welfare by next year. There was for example no move to reduce the huge amount spent on pension tax relief for the highest paid.

The Budget also contains grim reading for Labour politicians serious about retaking power in 2015. Osborne signalled that after the next election he would extend the annual cuts to departmental spending budgets for another two years and also slash welfare by a further £10 billion. To be credible at the next election Labour will need to develop an alternative plan for closing the deficit or work out how it can deliver savings on this scale without a devastating impact on the most vulnerable.

Comments on specific proposals:

Public Sector Pay: The proposal to ‘regionalise’ public sector pay has troubling implications for aggregate demand in poorer regions. It would reduce the extent to which public spending redistributes national wealth from rich to poor areas, further unbalancing our economy.

State Pension Age: It is right that the State Pension Age gradually rises to reflect longer life expectancy and an automatic process will help politicians of all parties push through unpopular decisions in the future. The critical question is what index should be used. Raising the State Pension Age in line with average life expectancy will substantially disadvantage poor communities where people die younger and live more of their lives with disabilities. While health inequalities are so wide, any automatic system should be based on changes to the healthy life expectancy of people living in low income areas.

National Minimum Wage: This is the sixth year in a row that the National Minimum Wage has failed to keep up with inflation. Low paid workers will be £1,000 per year worse off than they would have been if the NMW had been indexed to inflation since 2006. The Government is willingly presiding over rising earnings inequality.

Income tax age-related allowances: George Osborne’s stealthy tax raid on the top-half of pensioners will raise him an annual £1.2 billion by 2016. In principle it makes sense for richer pensioners to pay the same amount of tax as everyone else. But this measure will raise more than the Government could expect to save from mean-testing the Winter Fuel Payment so the quid pro quo should be an end to talk of removing universal age-related entitlements.

Child Benefit: The principle of universal child-focused cash payments is important and its loss could undermine long-term support for the welfare state. George Osborne’s concession will be welcome relief for people in ‘cliff-edge’ cases but the price is the greater complexity of tapered means-testing. Now that child credit is part of the means-tested system it would make sense to explore the case for a single child-focused payment that integrates tax credits, child benefit and childcare tax relief and provides support at some level to every family.

Corporation Tax: The UK must avoid engaging in a ‘race to the bottom’ on corporate taxes. It is in the long term interests of all rich nations to maintain a buoyant corporate tax base. Rather than playing ‘beggar my neighbour’ the UK should encourage greater coordination of business tax rates through the EU, OECD and G20.

Stamp Duty: It’s good news that the Government is clamping down on tax avoidance and raising Stamp Duty to seven per cent for homes worth over £2 million. But the proof of the pudding will be in the eating and it remains to be seen whether the promised revenue is actually realised. Very high transaction taxes are likely to encourage avoidance and could silt-up the property market. In due course they should be replaced by more affordable annual charges, such as the ‘mansion tax’ proposed by the Liberal Democrats.

Budget 2012: The green imperative

Give the Green Investment Bank real power. Now.

When it comes to crises, this generation is spoilt. I’d like to talk about 3 in particular. The climate crisis, the public attitudes to climate crisis and the economic crisis. There is one thing that could go someway to addressing all of these crises: A Green Investment Bank with real power. George Osborne should use the budget to give it real power. Immediately.

 The climate crisis has been well documented and evidenced. The threat of dangerous climate change is immense and real. Thanks to a powerful anti-climate PR machine and some hacking of University of East Anglia computers, we also have a public attitudes to climate crisis. Evidence from upcoming Fabian Society research has further confirmed this. Our focus groups on aviation policy have shown that public attitudes towards climate change are increasingly characterised by suspicion of exaggerated climate science.

This means that how the Government acts and deals with climate issues is of great importance not only for policy outcomes, but also for public perceptions.

 We also have an economic crisis. Large infrastructure projects are an effective economic stimulus. Keynes has taught as us much. Rachel Reeves also makes very good arguments for this in her Left Foot Forward article

The urgency of both the economic and climate crises mean that we cannot afford to delay the investment in green infrastructure. And what is worse, failing to do so only exacerbates the public attitudes to climate crisis. Why? Because if climate change is, as David Cameron states, one of, if not the greatest challenge facing our generation, then why is the Green Investment Bank something that can wait a few years before it becomes effective?

 Let us give the Green Investment Bank real power and send the message out that the UK will not tolerate sluggish growth, and furthermore, this country is taking the climate challenge seriously. Responsible capitalism needs responsible Government. Right now we have neither.

At next week’s Climate Justice conference, we’ll be talking in more depth about how to win the public argument on climate using notions of fairness and responsibility. What will you be doing to play your part Gideon?

Tuesday 20 March 2012

Budget 2012: The case for investment

By Anthony Painter

Politics is the enemy of good fiscal and growth policy. This dynamic reveals itself in the tough times rather than the fair. The worst thing you can do if you want to support both short and medium growth is eliminate expenditures on investment. And yet, when you have to reduce a deficit that is exactly what gets cut first.

So this explains why net public investment is scheduled to fall from £38.6billion in 2010-11 to £21billion in 2016-17. And it’s economically mad. Capital investment has a higher ‘multiplier’ – ie a greater impact on growth than tax cuts or increases in current spending on services. To cut it creates undue economic harm and over time - it will pay for itself as the country’s growth potential is enhanced.

There is an obvious need for tens of billions of capital investment – transport, energy, digital infrastructure, higher education, schools, skills and new housing. The Government’s National Infrastructure Plan identifies £250billion of needed infrastructure investment. There should be a register of ‘shovel’ or service-ready projects running into the tens of billions that should be ready at any time to be brought forward should the economic need to do so be there.

The IFS demonstrated in its green budget that a £9billion short-term stimulus can be initiated without harming medium-term consolidation. There are some signs that pension funds are also very willing to invest in public infrastructure projects. It is important to create investment vehicles for them to do so. A National Infrastructure Bank along the lines of the European Investment Bank (of which we are a member!) would make sense to enable this investment to be channelled into our infrastructure needs as soon as possible.

The SMF has argued that there is a different way to consolidate – a fiscally neutral stimulus – in its recent pamphlet, Osborne’s choice. Essentially, this involves, in the American vernacular, shifting expenditures from recurring entitlements to discretionary investments. Once you have built a road you don’t need to build it again. However, you have to pay a tax credit every year while you are legislatively committed to do so. What’s more, entitlements are more politically sticky. The SMF identified £15billion of expenditures that can be shifted from current to capital expenditure.

One final aspect to this approach that needs to be considered. There is a perverse accounting logic at the moment when it comes to prioritising investment. There is current expenditure such as certain elements of welfare-to-work, skills and higher education (eg engineering degrees) that have the characteristics of investment rather than current expenditure. Even if we reverse the short-termist political logic of cutting capital expenditure then we may still miss these important investments.

Actually, there is quite a bit that can be done in the short-term to boost growth now and in the future. It can be done in a fiscally responsible manner. Actually, it’s irresponsible not to do it. This doesn’t alleviate the pain of returning to a more fiscally sustainable path but it does salve some of the economic pain. It will create jobs and growth and help reduce the deficit more effectively in the medium term.

An invest to grow strategy while pursuing a fiscally sustainable policy is precisely what has been proposed by the Obama administration in its 2013 budget. It reduces the deficit by 3% from 2012 to 2013 and eliminates the primary deficit by 2018. And it still finds room for massive investment in infrastructure and human capital. For me, this is the essence of what the In the black Labour argument was about. It argued for an ‘enterprise’ rather than a ‘welfare’ state. To achieve that requires political leadership, determination and a move away from retail politics. It turns out that it’s the politics, stupid.

Anthony Painter is a writer and commentator. He co-authored "In the black Labour" and his book on the future of the left will be published later this year.

Monday 19 March 2012

Budget 2012: A budget for women

Ivana Bartoletti, Editor of Fabiana, the Fabian Women's Network magazine, writes on what women need from George Osborne's budget on Wednesday. 

The Government will present the Budget on Wednesday, and I fear it will be another missed opportunity to address crucial issues affecting women in Britain.

The British economy is failing women, and the Government’s plan is not working: unemployment has increased to 2.67 million in the three months to January 2012 and Jobseeker’s Allowance (JSA) claimants increased for the twelfth consecutive month to 1.6 million.

Women are being affected disproportionately by the cuts and failure of the economy. But what are the key priorities the Government should deal with in the Budget to protect women? In my opinion, these should be: a plan for women’s jobs, less ideology and more common sense on welfare policy; and women’s safety.

A plan for women’s jobs

Female unemployment has reached its highest level in two decades; beyond the 1.1 million mark. 65% of public sector workers are women, and that is where the Government has perpetrated the biggest cuts.

Research, published by Aviva last summer, showed that, since the third quarter of 2011, 32,000 women have already left their jobs to look after their children, because they cannot afford to work. And things will get worse. The Social Market Foundation estimates that, by 2015, childcare costs will rise by 62% compared to 2006. The Institute for Public Policy Research (IPPR) has shown how the gap between the rates of female employment and maternal employment (women with children under the age of fifteen years) is higher in Britain than in other OECD countries.

With the Coalition Government cutting over £7,545 from direct support to children (through cuts to child tax credits, maternity allowance and the child trust fund), it is increasingly more difficult for mothers to work.

We need to stop this slide, not just for women, but for the whole economy. We need a plan to stop women being held back from work.

Less ideology and more common sense

The change to working tax credits means that couples with children, who earn less than £17,700, will need to increase their working hours from 16 to 24, otherwise they will lose their entitlement to £3,870 in tax credits.

In practice, this means that in a period of recession, with businesses forcing their employees to cut back on their working hours, people will have to convince their employers to increase their working hours by 50%. How realistic is this?

The reality is that this measure will, inevitably, push out of the workforce many of those employees who will not obtain the increase in their working hours that they need, to retain their working tax credits.

We must consider the long-term effect of a measure that will cause up to 200,000 working parents to lose almost £4,000 a year in working tax credits, and make parents on the minimum wage, working 16 hours a week, better off out of work, if they are unable to increase their working hours. In fact, I believe, in times of recession, it is crucial that people are supported in keeping the jobs they already have, as this will make it easier to return to full employment when the economic downturn ceases.

This is another example of the Conservative-led lack of long-term vision. Will George Osborne see the light and cancel the change to tax credits?

Women’s safety

Globally, women aged 15–44 years die more frequently as the result of gender-based violence than from cancer, malaria, traffic accidents and war. Violence against women should never be underestimated.

Massive cuts to police budgets are affecting women, and making them more vulnerable.

16,000 staff and 1,800 Police Community Officers are being cut. Everywoman Safe Everywhere, Labour’s Commission on Women’s Safety, launched by Yvette Cooper MP and led by Vera Baird QC, has found evidence that specialist domestic abuse officers have also been cut. The Commission’s report also shows how the Government is considering the closure of 675 ticket offices in train stations, which will make women even more vulnerable.

All of the above, together with cuts to local authorities having a dramatic impact on street lighting, as well as on support services for victims of rape and abuse, need to be addressed. Women’s safety needs to be a priority as its long-term consequences are crucial for the well-being of women, their children and their communities. 


Two weeks ago, on International Women’s Day, the Prime Minister had positive words with regard to women. He claimed that he wants equality in boardrooms, and even takes Nordic countries as an inspiration.

The facts, however, reveal a complete different picture. Women don't not need a cuddle on Wednesday, but a vision for the economy, with women at its heart.

Friday 24 February 2012

Part-time Parliament a loopy idea

This week Jack Straw proposed abolition of the European Parliament. Richard Howitt MEP, Chair of the European Parliamentary Labour Party (EPLP) and speaker at this weekend's 'Social Europe: Worth Fighting For?' conference gives his response.

Oh Jack. You are and have been a great servant of the party and I have always forgiven that the European Union isn't your favourite dish. But you only needed to ask some of the politicians in your own generation to know that returning to a European Assembly of national politicians replacing the directly elected Parliament would be completely loopy.

It was tried in the 1970s and the logistics of MPs undertaking their parliamentary duties at home, travelling and trying to engage in joint work with counterparts from eight other countries proved unworkable. It was why direct elections were first agreed for 1979.

The politicians of that era I have talked to, speak with affection about the bars and nightspots of Strasbourg, but not of any political achievements in going there.

And that was before the European Parliament had full legislative powers, now incorporating 27 countries, and meeting 44 weeks a year, (far more than Westminster). Unlike the Commons division lobby, the European Parliament votes on 800 policy proposals and 10,000 amendments in each parliamentary year.

If the aim is to build trust in European institutions, a part-time Parliament is the last thing we need.

Indeed the impact of abolishing Europe's directly-elected Parliament would be to reduce scrutiny of legislation and of EU spending, lessen visibility and remove the very people the Eurosceptic press can never justifiably brand as "Eurocrats." In British public opinion, it would have the very opposite impact to the one you propose.

Parliamentary democracy is a fine and noble thing. It builds public support by bringing political debate and decision-making in to the open, and by giving citizens the chance to be the ultimate decision-makers through the electoral process. This is the case throughout the world and has to apply to Europe.

But there is a narrow Labour Party point to all this too.

Labour Euro MPs constantly strive to serve our constituents effectively and we must always be prepared to be self-critical on how we can do better.

But Labour in Government - the government in which you proudly served - too often failed to put the case for Europe, and fell in to the trap of claiming credit for European achievements for itself and blaming Europe for the things that go wrong.

But the days of the party treating its MEPs as the embarrassing aunt are long-gone.

The new generation of Labour politicians from Ed Miliband to Douglas Alexander, Emma Reynolds to our own leader Glenis Willmott, all appreciate that Labour has to do better on Europe as on other issues than limiting solutions to those from within the Westminster bubble.

Jack, it was a privilege to serve in your team as Labour's Foreign Affairs Spokesperson in Europe, when you were an outstanding Foreign Secretary.

But I recognise that perhaps one job that is beyond me is to be able to change your own views on Europe.

Richard Howitt MEP is Chair of the European Parliamentary Labour Party and Labour Member of the European Parliament for the East of England.

E-mail: Twitter: @richardhowitt

Thursday 23 February 2012

Millande? Hollaband? Why Labour must get off the sidelines on Europe

Fabian Society General Secretary Andrew Harrop writes for Next Left ahead of this weekend's Social Europe: Worth Fighting For? conference

With the European right rallying behind Nicolas Sarkozy for the upcoming French presidential election, Ed Miliband must now move Labour away from the sidelines and offer similar support for socialist candidate Francois Hollande.

As politicians on the European right, buoyed by a period of centre-right ascendancy across the EU, have been campaigning together to secure austerity Europe, the left has, in contrast, been fragmented. As a consequence the burden has fallen on the grassroots to emerge as the sole vehicle to oppose the right’s vision of enforced austerity. Instead of the centre-left political parties articulating an effective opposition across Europe, it is in the indignados of Madrid, the Occupy movements and the anti-cuts protests in Brussels, London, Rome and Athens, rather than parliaments where the real opposition has emerged.

This is no more obvious than here in the UK where the Labour party has seemingly adopted a position of pragmatic Eurosceptism. Ed Miliband seems to be content to look on as the Tory right tear chunks out of David Cameron, while judging the issue far too toxic to actually make a serious comment on.

This is simply not good enough. With the centre-right coalescing around a shared vision of austerity, Ed Miliband must put himself at the forefront of an 'alternative to austerity', allying with leaders like Hollande who are willing to espouse the same policy. To succeed this must incorporate an economic message – propounding the need for investment in jobs and growth not just budget cuts – but also champion European policies defending strong social rights and welfare.

The Fabian Society’s Social Europe conference this weekend will focus on these rights which the centre-right consensus in Europe has identified clearly as an obstacle to the small-government, fiscal discipline answer to the financial crisis. In Greece, the enforced budgetary cutbacks have targeted the minimum wage, working time regulations and the pushed for the introduction of a more ‘flexible’ job market. In France, Sarkozy has talked about the need to relax the 35-hour week and to pay for removing social charges on businesses paid for by an increase in that least-progressive of taxes, VAT. In the UK, right-wing Tories like Liam Fox talk about relaxing constraints on business, a message woven closely together with the endless Conservative diatribes about Brussels red tape.

This race to the bottom will help no-one in the long run. There is growing evidence from the UK and abroad that government spending cuts are fundamentally harming growth, producing fractional growth figures for successive quarters. Nor is there any substantive evidence showing that cutting back on employees’ rights and making it easier to hire and fire, produces genuine growth in jobs. Both Ed Miliband and Francois Hollande have spoken convincingly about the need for a more responsible capitalism, this message must be a key part of this.

These are problems that are taking place on the European scale and merit a response from a united left in Europe. It is simply not credible for Ed Miliband and Ed Balls to propose their economic alternative in the UK, while ignoring the wider European context. Sooner or later, they will have to get off the fence.

There are still a handful of tickets available for 'Social Europe: Worth Fighting For?' - to get yours please visit the Fabian Society website 

Thursday 16 February 2012

Meeting the Growth Challenge

Fabian Society General Secretary writes for Next Left as the Fabians launch a new publication  "The Economic Alternative, following on from January's New Year Conference 2012. You can read the full report on the Fabian website here

Leaf through the Office for Budget Responsibility’s (OBR) November 2011 forecast and it is plain that any post-2015 government that wants to bring public debt under control will need to take hard fiscal decisions. So Ed Balls’ announcement at Fabian New Year Conference that the party would not reverse coalition tax rises or spending cuts should it return to power in 2015 may have been controversial, but it shouldn’t have come as a surprise. If anything Balls is being too optimistic. The chances are that as chancellor he will have to do more than accept the status quo he inherits and actually cut spending or raise taxes for himself.

That’s because George Osborne has stealthily pencilled in £20 billion of cuts for after the next election to complete his deficit reduction plan. This number is itself based on GDP projections that could be far too optimistic, as the effects of austerity and the eurocrisis combine. The detail is impossible to call this far from an election, but Labour’s shadow treasury team need to reckon on a fiscal squeeze of at least the scale Osborne has in mind, even if they choose to close the gap more slowly.

Labour will need to make a stand, however, on the question of how to close the post-2015 fiscal gap. George Osborne says that after the next election he will act only through tax cuts. On the OBR’s figures, that would leave the share of economic activity in the public sector below its post-war average. In other words, the chancellor is covertly planning to ‘overshoot’ his commitment to bring public spending back under control. This confirms the left’s suspicions that his real agenda is to reduce the state’s share of the economic pie for good.

If Labour wants to stop this structural shrinking of the state, it will need to set out an alternative, where tax rises, not spending cuts, are the main post-2015 route to deficit reduction. Since the debacle of the 1992 shadow budget this has been dangerous terrain for the left. But Labour needs to get used to the idea that ‘tax rises’ v ‘spending cuts’ might have to be a defining issue of the 2015 election. Better to prepare the ground now than pretend the choice will go away.

That dividing-line is some way off, however. What about the here-and-now? For the time being Labour needs to do much more to set out the ‘economic alternative’: what it would do if it were in power today.

Where I quarrel with Ed Balls is not over his realistic stance on the public finances post-2015. It is that he is not balancing this message with a radical short-term programme proportionate to the scale of the economic troubles we face. Had Balls set out a truly ambitious growth plan alongside his fiscal realism, he might be having much less trouble explaining his alternative both to the public at large and to allies within the left.

So what should be the key ingredients of an immediate plan for growth? First, Labour should champion a state investment bank. The idea is simple: sell tens of billions of pounds of long-term bonds at today’s astonishingly low interest rates and use the proceeds to capitalise an arms-length investment bank which can then lend for spending on infrastructure, business growth and house-building.

Second, Labour should make the running on short-term tax cuts to show that stimulus does not just mean public spending. The priorities for cuts should be employers’ national insurance (to create jobs) and highly visible tax cuts or cash-back for low and middle income groups (to get the tills ringing).

Third, a significant job-creation scheme is now essential – say a guaranteed job for everyone unemployed for 12 months. But this must be funded, be it through taxes on the rich or spending cuts elsewhere. That’s because arguing for fewer or slower cuts overall (as opposed to different spending priorities) is now counter-productive. The reason for saying this is partly political: Labour needs to convince people that its support for Keynesian stimulus is not simply motivated by pro-state ideology. There is also little point in putting off cuts when horrific spending decisions are inevitable, sooner or later. Why call for delay only to store up problems if Labour regains power?

But there are other more fundamental reasons; the left might not like it but it has to accept that governments need to retain the confidence of the bond markets. Osborne is now more-or-less following Alistair Darling’s original profile for deficit reduction, not through choice but because he has so mishandled the economy. To be credible the timescale for balancing the budget can’t be extended very much more or the markets will begin to believe the eventual end-point has been abandoned. For the same reason, they need confidence that any stimulus will be truly temporary and it’s easier to turn off the tap on one-off bond sales or time-limited tax cuts than public service spending.

A big public sector stimulus is necessary but not sufficient to kick-start growth. Many UK companies and households have very healthy balance sheets (corporate cash reserves and expensive homes) but they don’t see enough reasons to invest or consume. Others, who would normally be seen as credit-worthy, can’t borrow in today’s climate or are put off trying. A key element of the state’s response to the crisis should be to devise ways to facilitate or incentivise private spending by those households and companies not over-exposed to debt.

Tuesday 14 February 2012

Social Europe: Worth fighting for - The Results

Ahead of our ‘Social Europe: Worth Fighting For?’ conference on 25th February the Fabian Society conducted a membership survey on the EU to find out if the views of our traditionally pro-European membership have shifted.

The results, in many ways, were as expected. Our membership remains overwhelmingly pro-European but, in tune with the country at large, our members are also starting to move further towards the Eurosceptic side of the argument. This is especially the case when questions about widening the UK’s involvement with the project and of democratic accountability are asked. This is underlined by eight out of ten Fabian members believing the EU lacks democratic integrity and only one in five being able to name all their MEPs.

First the good news for our pro-Europeans, a North Korean-esque 94 percent believes that the UK should not only remain part of the EU, but that we as a people benefit from continued membership. EU-led changes such as relaxed border controls, free trade and even the single currency were all cited as reasons for optimism about what the project has accomplished.

When asked about which policy areas should see deeper integration with our EU partners the picture becomes more mixed. There is clear support for deepening our ties when it comes to tackling climate change (78 percent), employment rights (70 percent) – surely a victory for Trade Union campaigning there - and security and defence (64 percent).

The most important issues for Europe to cooperate on
There was less enthusiasm, but still a majority, for home affairs. A signal that, while Fabians see the benefits in areas where we are already integrated, increasing numbers are wary of deepening ties. 53 percent wanted more integration on issues like social affairs such as health and 54 percent on crime and justice, a 20 point gap from our top rated issues.

The real Achilles heel for the European project continues to be what anti-EU campaigners call the ‘democratic deficit’ in its institutions. When asked if it was thought voters had enough power over the EU an astounding 78 percent said no. As if to underline this point we asked how many of our members knew who all their MEPs were and only a paltry 22 percent could name them all (56 percent said some and 22 percent said none).

Given that Fabian members are both very engaged politically and overwhelmingly pro-European these are shocking numbers and questions about Brussels democratic element have to be seriously asked.

Do you know who your MEPs are?
Our MEPs lack of cut through isn’t a new phenomenon and there are questions for all of us who work in politics. A quick straw poll of the Fabian office revealed just one staff member who could name all his MEPs (a far lower percentage, it has to be said, than Fabian members managed), and he previously worked for an MEP.

Without a recognisable public face the charge of ‘faceless Brussels bureaucrat’ becomes impossible to refute, and easy shorthand for any anti-EU campaigner looking to score cheap points in a debate. The EU can’t dissolve the electorate and elect a new one so it needs to look at itself and work out the fairest (and most engaging) ways of making decisions in future. Without it even our Fabian pro-Europeans will continue their drift towards Euroscepticism.

You can view the full survey results here

There are still a few tickets available for "Social Europe: Worth Fighting For?" on Saturday 25th February. Visit the Fabian Society website to get yours today.

Olly Parker is head of Partnerships and Events at the Fabian Society

Monday 13 February 2012

Why we need Social Europe

Ahead of the Fabian Society's Social Europe conference on 25th February, Ivana Bartoletti, Editor of Fabiana and former policy advisor to Romano Prodi government in Italy, writes for Next Left on why a social agenda must be at the heart for Europe  

European social policy comprises a variety of interventions, which take place mainly through the so-called Open Method of Coordination. The outcome is an amalgam of legislation, financial aid, cooperation and soft law mechanisms such as guidelines, benchmarking, and best practice.

In recent years, soft law mechanisms have become the preferred route to promote innovation in social policy. They are embedded in the Lisbon Strategy, which was adopted in 2000 with the aim of turning Europe into a socially inclusive and competitive, knowledge-based economy by 2010.

However, in the past ten years the idea underpinning the Lisbon Strategy — that economic and social goals must be closely connected — has been slowly abandoned. By 2005, the focus of the Strategy had shifted from considering social policy as a key factor for growth, to simply ‘growth and jobs’, without any mention of it. This didn’t happen by chance, but has been the result of the swing to the right, which has occurred in many countries over the past ten years.

Such a shift in the political agenda has become clearly visible in the way the EU has decided to deal with the current crisis. European countries, almost all run at present by conservatives, seem to believe that austerity is the only way forward to tackle the crisis. Whether true or not, this has had the effect of making citizens feel that Europe cannot provide any social protection, thus disenfranchising them; this belief can lead easily towards nationalism and protectionism.

Political and economic wisdom, as well as analysis of the outcomes, should suggest that austerity, à la Merkel and Sarkozy, does not work. A Wall Street Journal article, published in 2009 warned of the risk of EU countries entering a vicious circle of deflationary ‘beggar-thy-neighbour’ wage strategies; something which would endanger countries and lead to a spiral of poverty and lower living standards.

I am reluctant to accept historic comparisons which do not recognise the fact we live in an unprecedented time.

The process of European integration has now gone far enough that old remedies, such as currency devaluations and trade protectionism, are not viable solutions.

At the same time, solutions based on the traditional social-democratic vision of the big State are in my view outdated too, not only because resources are tight but also because big, state-led programmes have not always achieved what was hoped for.

It is within this context that Labour needs to develop a new narrative on Europe and I think the way to achieve this is by endorsing the original spirit of the Lisbon Strategy: to re-establish the social element as a key factor of growth.

Firstly, the EU is a single market, and it is in our interest to pursue a concerted social agenda among all member states. Equalising the social conditions of workers means ensuring we avoid a race to the bottom, which would ultimately affect us all. The reality is that the trend in reducing rights has already started. 

Secondly, we need to compete in the wider world. In 2006 I became head of human rights for Labour sister party in Italy, and I have since advocated that if we, as Europe, want to compete with, for example, China — a country which does not combine growth with rights — we cannot follow the same path, and would not want to.

Having recognised the importance of the social element as a key factor of growth, we can relish the challenge of developing a new social agenda in these tough times.

My argument applies very well to women: maternity rights as well as the provision of adequate and affordable childcare (topics which have always been at the very heart of the Lisbon agenda) are social priorities which will trigger growth. History shows us that removing the obstacles to women’s full participation in the labour market is a key factor for growth and the creation of wealth for households.

This is why I believe the European social agenda can give Labour the bedrock for a new narrative on Europe, so long as we restore its original spirit and we make it work in today’s tough times.

There are still a few tickets available for "Social Europe: Worth Fighting For?" on Saturday 25th February. Visit the Fabian Society website to get yours today.

Friday 10 February 2012

Checking the blind spot - Examining violence against women

This is a guest post by Vera Baird. Vera is a member of the Fabian Society Executive Committee and Chair of the new Labour Commission on Women's Safety, commissioned by shadow home secretary Yvette Cooper.

Yvette Cooper described this Government, whose first budget took 70% of its cuts from women and 30% from men, as having “a blind spot” about women. She seems to be right when one considers, not only economics, but also plans such as the deletion of 17,000 rape suspects from the DNA database, as it becomes ever clearer to police that rape is often a serial offence.

Women’s organisations now fear that cumulatively, the Coalition’s policy, legislation and cuts are having a worrying impact on those services that work to protect women. We have found from our visits so far that these concerns are being backed up by facts from the frontline and illustrated by the experiences of the individuals we meet.

Last week Professor Sylvia Walby, UNESCO Chair in Gender Research at Lancaster, published a report showing the “dramatic and uneven” impact of a national reduction of 31% in funding for local gender violence services last year. Smaller organizations have suffered on average 70% cuts, whilst those receiving over £100,000 lost 29%.

Consequently, Women’s Aid have reported that up to 230 women fleeing domestic violence were turned away because of a lack of accommodation on a typical day in 2011. Eaves, which also provides refuges, has been forced to advise woman on how to minimise risk while sleeping on the streets or at Occupy camps.

Research by the Women’s Institute shows that women will be disproportionately harmed by cuts to legal aid, while Rights of Women demonstrate that 49% of current service users would not be eligible at all under the new rules, despite Justice Minister Kenneth Clarke repeating that such women will still get legal help. Violent men will not get legal aid either and, by handling their own cases at court, will get a state-sponsored opportunity to abuse their victim further by cross-examining them face to face.

A poll from training specialists, CAADA shows that, in 2011, 2 of the 8 major providers of Independent Domestic Violence Advisers, who are widely credited with saving lives, faced cuts of 100%. 3 lost 40% and 2 more will lose a quarter. IMKAAN, with six specialist refuges for Black Asian and Minority Ethnic women, is being forced to close two and reduce capacity in two more.

In Coventry, there is a 30% loss of floating support for survivors of violence. Cuts to housing benefit mean that a single woman under 35 who flees domestic abuse will only get the rent for a room in a shared property. A correspondent to our website says, “The Suzie Project in my home town has lost its funding, so we’ve had to end our group. Cutting funding to projects which support survivors of rape leave people like me feeling all alone.”

In one East Midlands ward, police identified domestic violence perpetrators and knocked on their doors on the nights when they were typically violent, to reassure their partners and deter these men. This preventive policing measure stopped because of officer shortages. Professor Walby found that 78% of perpetrator programmes had cut the numbers of clients they could assist.

Half of councils who responded to a Labour Party survey in November were reducing their street lighting to save cash. Local Government Secretary, Eric Pickles calls this “sensible,” while, on the other hand, the Police Federation said “the lighter an area is, the safer it is.”

Lighting cuts affect everyone in our communities, but Netta e mailed our website to say that it is women who are often left feeling more insecure:

“Cuts to street lighting – imposed by Suffolk Country Council - are happening here in Ipswich. Female friends … tell me [and I can confirm from having looked at a few] that it is quite scary. If you don't have a car, can't afford taxis and are used to walking around your own town in safety, it does make quite a difference having this "curfew" imposed.”

A national non-political women’s group told us that violence is the pre-occupation of its website traffic and women say that, as resources are cut back, they would not know how to leave a violent home if they needed to do. Professor Walby writes: “These cuts to provision are expected to lead to increases in this violence.” 

Half way through the Commission’s inquiry, we are beginning to understand her fears.

Professor Walby’s report, Measuring the impact of cuts in public expenditure on the provision of services to prevent violence against women and girls (February 2012), can be found here.

Tuesday 7 February 2012

More cutbacks mean more riots?

Professor Peter Taylor-Gooby, Professor of Social Policy at the University of Kent writes for Next Left on the link between cuts and social disorder.

More cutbacks mean more riots? Many readers of Next Left might have suspected that already, but were drowned out as politicians and commentators clamoured to lay the blame at the feet of poor policing, poor parenting or simple hooliganism.

However, I've just completed a study which shows that they are the kind of response to harsh government policies which we increasingly should expect.  The work takes two sets of data. The first is a database compiled by Harvard University researchers which details social disorder in developed countries (riots, political demonstrations and political strikes). The other is the Organisation for Economic Cooperation and Development’s international database on public spending, privatisation, job security and poverty. Both these agencies are among the most highly respected in their fields.

My study puts these two sets of data together and sets them in the context of other relevant issues such as national public policy tradition or specific factors operating at a particular point in time. It shows that over a 25 year period and covering 26 countries, greater poverty, welfare state privatisation, public spending cuts and job insecurity lead to more disorder. These findings are reasonably robust in relation to different ways of specifying policies and their outcomes, different time-periods and different countries.

Significantly for contemporary debates, it's change rather than level in the various factors that seems to be most important: the rate of increase in poverty or of shifting government services to the private sector, the speed with which social spending is cut back. The UK government's social programme involves the most profound policy changes for at least two generations. It is now beginning to bite. Projections by the Institute for Fiscal Studies indicate that at least 400,000 more children will be in poverty by 2015. The reforms to the NHS and social care, the harsh cutbacks in funding for Sure Start and for local government and the policy of contracting services like the Work Programme to the commercial sector will privatise a substantial part of state services. More stringent eligibility tests for benefits and changes to employment protection in a context of rising unemployment mean greater job insecurity. The programme also proceeds at a hectic pace. The Coalition is bent not just on achieving major cutbacks, but on changing policy so that the cutbacks are embedded, making them much more difficult for the next government to reverse.

The research reported here indicates that it is exactly this kind of rapid deterioration in living standards for the most vulnerable groups and headlong privatisation that is most likely to lead to public disorder. Last summer the poorest areas of big cities experienced the most violent riots for a considerable period. This was followed by major demonstrations and the largest strikes against government policies - particularly the public sector pension cuts - since the 1980s. Similar unrest is evident elsewhere in Europe.

As 2012 progresses we will see further increases in poverty, rising unemployment, greater insecurity for those in work and more privatisation as the welfare state is cut back. This research indicates that we will also see more riots, demonstrations and strikes disrupting our cities. Again I'm sure many readers of this blog believed that it was worsening social conditions in big cities that were responsible for social unrest. When the poor have no other avenue open to them, they riot.

The recent Guardian/LSE study of the London Riots  shows how the impact of cutbacks on already deprived communities set the context for the inner-city explosion. The research reported here sets that kind of study in a larger context and shows how cutting the welfare state and increasing poverty tends to result in unrest across European countries.

The full paper "Riots, demonstrations, strikes and the Coalition programme" is available on request by emailing

Friday 3 February 2012

In Defence of Social Democracy

Dr Kevin Hickson is Senior Lecturer in Politics at the University of Liverpool and co-author with Roy Hattersley of "In Search of Social Democracy". Here he responds to David Miliband's article in the latest edition of the New Statesman. 

 Firstly, I would like to thank David Miliband for taking seriously the arguments which were presented in my recent article in The Political Quarterly, ‘In Praise of Social Democracy’ co-authored with Roy Hattersley.  Obviously we disagree over the recent past and the future of the Labour Party, but this should be a debate over principles and not personalities.

What does David argue?  The implication is that we are being intellectually complacent - lazy even – wishing to retreat into some kind of comfort zone, reassuring ourselves while failing to do what is necessary to win the next General Election.  In fact it is the other way around, the complacency comes from David Miliband, and other Blairites in the Party who wish to have more of the same, the ‘unfinished’ Blairite agenda of the pre-2007 era.  It is this agenda which seems dated and irrelevant.  David is correct, Britain and the world have changed - we are now in a ‘post-crash’ era – but it is the older Labour values that seem much more relevant now than Blairism.

I wish to make several arguments in response.  Firstly, there is no trade-off between principles and power.  We should not think, as some on the left have done in Labour’s past, that it is better to remain in opposition so as to be ideologically pure but nor is necessary to sacrifice key principles in order to get into power.  New Labour was incredibly cautious not only in the run up to the 1997 election, which is understandable, but afterwards.  The feeling of most Labour supporters is surely one of regret.  Labour did good things in power but overall the sense is one of a squandered opportunity.  The fundamental purpose of a Labour government is to achieve greater equality.  In this New Labour failed, if indeed it ever tried seriously to do so.  Now the best hope for the Labour Party electorally is to be much more ideological.  

Moreover, we should defend the central state.  We did not argue that the state can do everything, nor is it perfect.  There is plenty of scope for constitutional reform, for more effective central-local relations and for greater international cooperation between nation-states in a more global world.  But what we should not forget is that the state is the only thing which can get us out of the economic mess and if there had been more effective banking regulation rather than championing a laissez-faire approach as New Labour did then the effects of the global banking crisis would not have been as severe as they were in Britain.  New Labour left the British economy overexposed to financial services, lacking effective regulation and an absence of active industrial policy.  This was surely the greatest failure of New Labour in domestic policy and we should never forget this.  By saying that we should find alternatives to the central state David continues to miss this crucial point.  It is the market – not the state – which should be the primary target for criticism and reform.

The contributors to The Purple Book and those associated with ‘Blue Labour’ share a commitment to extreme localism.  David has re-emphasised that belief in his article this week.  However, what is striking about this commitment is how pointless it is as a response to the major issues of the day.  Few, if any, banks are based locally – perhaps they should be but they are not.  It is incredibly difficult to see how effective economic regulation can be achieved by greater localism.  Similarly, David wants to decentralise public services but at the same time fails to explain how this can do anything other than exacerbate the postcode lottery in welfare that Labour has historically sought to diminish.  Greater powers can and should be given to local government but this also requires a compact between central and local government.  The ‘big society’ is an attack not only on central government but also local authorities.  An essential task for Labour is to defend the state, both central and local.

In the week that David chose to write his article Ed has effectively tapped into the sense of unfairness felt, legitimately, by the British people against astronomical bankers’ bonuses.  We should have the confidence in our traditional values, not because we wish to retreat into our comfort zone but because they are both right and popular with the electorate.

You can read Roy Hattersley and Kevin Hickson's original article "In Search of Social Democracy" in Political Quarterly here.

Farewell Huhne...

Natan Doron is a Senior Researcher at the Fabian Society

In Winter 2012 I had the pleasure of sitting opposite Chris Huhne at a Fabian Society Environmental Policy Network dinner. He quoted Trotsky and poked fun at the Big State Fabians. In the main though he spoke as someone who was on top of his brief, understood the scale of the challenge and most importantly, had the gravitas to stand up to George Osborne in cabinet. However you look at it today is a bad day for the battle to avoid the worst effects of dangerous climate change.

Because in 50 years, no one (except perhaps Paul Staines, Harry Cole & hardened Lib-Demologists) will care about Chris Huhne’s driving offences. They will however, care about what the UK did to show radical, innovative and effective leadership on the challenge of shifting our energy portfolio to a more sustainable place. This does not mean Huhne should be excused, but rather that the political debate needs to focus now on getting the right person for one of the (if not the) most important brief in Government.

A wealth of research from the Fabian Society’s Environment & Citizenship programme shows that in an age of creeping scepticism and uncertainty on climate, the public need and expects a Government that shows strong leadership on climate change. This was something that, despite his faults, Chris Huhne understood. That’s why Huhne was right to push for increased ambition in Durban when everyone had written off the chances of any deal at all being made.

As the Fabian research makes clear, the public see the Government as a legitimate voice on issues of climate and they want a framework of policy initiatives that ensures everyone is involved in efforts to reduce the climate impacts of behaviour. This Government needs to understand the importance of rules and regulations in sustaining co-operation: ‘nudging’ in itself is not enough.

The coalition is increasingly making a mockery of its self-awarded greenest government ever title. This only maximises the level of expectation on the incoming secretary of state. Ed Davey has a hell of a job on his hands to fill the boots of Huhne and to make sure we don’t fail future generations by sacrificing the stability of our climate at the altar of Osbornomics.

Wednesday 1 February 2012

Boris' "75p moment"

Fabian Society General Secretary Andrew Harrop (@andrew_harrop) takes a look at Boris Johnson's council tax cut

Boris Johnson’s announcement of a 1% cut in the City Hall component of Londoners’ council tax has been met with astonishment verging on ridicule (see Labour AM John Biggs’ “onion argument”). It reduces the average household payment by the staggering figure of £3.10 per year. At a time when people across the capital are coping with squeezed incomes, Boris’ pledge to cut the tax liability of London householders by less than a penny a day seems almost satirical.

In a typically grandiose press release issued by the Mayor’s Office, Johnson describes his “pride” in “taking this step towards easing the burden” and in an interview with the Evening Standard lauds this as “the end of an era where arrogant politicians showed contempt for London taxpayers”.

But how can we reconcile this soaring rhetoric with the measly reality?

Readers with long memories will perhaps be reminded of the furore that greeted the 1999 budget when Labour announced its 75p weekly increase in the state pension. Attacked vociferously by Conservative opponents and questioned by older people’s groups, no-one could realistically say this was the Labour government’s finest moment of political management. Fast-forward almost ten years and Gordon Brown embarked on his ill-fated abolition of the 10p tax rate, prompting dismay on all sides of the House of Commons.

At the root of the problem in those two cases was the same division between rhetoric and reality. To struggling pensioners the stark reality of a 75p per week increase jarred with the overblown statements of ministers. The abolition of the 10p tax band clashed with Brown’s promise to “ensure working families are better off” and deeply damaged his credibility. Both served only to reinforce New Labour’s association with spin and dissimulation.

Could this be Boris’ “75p moment”?

It’s certainly a lame-duck policy. It offers hardly any relief to Londoner’s struggling in these straightened economic times. If it is, as the Evening Standard asserts, an attempt to “trump” Ken Livingstone’s Fare Deal campaigning, Boris has played the wrong card.

In last month’s YouGov London mayoral poll, only 13% of those polled thought that Boris Johnson “was in touch with the concerns of ordinary people” (in comparison with Ken Livingstone’s 40%). A headline-grabbing announcement that promises so much but delivers so little for Londoners will only exacerbate this.

At best it is naïve, at worst it smacks of desperation.

Baby steps towards responsible capitalism?

The past week has seen Sir Fred Goodwin lose his knighthood and RBS chief executive Stephen Hester surrender his £973,000 bonus. Headline grabbing events by their very nature, questions are now being raised as to whether we are witnessing the first steps towards responsible capitalism or symbolic gestures merely equating to the public being thrown a bone?

First rearing its head at the embryonic stage back at Labour’s party conference, the “responsible capitalism” agenda is one which seems to be sticking. Once again, much like 2011’s “squeezed-middle”, opportunistic Tories, recognising the resonance the issue has with the public, have leapt aboard the bandwagon. With this, a movement has pushed the agenda into the public consciousness. But perhaps it has only been in the past week when the concept has become a reality.

Spurred on by Sir Philip Hampton’s rejection of his £1.4 million bonus, on Monday Stephen Hester, RBS chief executive, caved into growing political pressure when faced with the possibility of a Commons vote and yesterday, with a frightfully cold evening looming, news outlets across the nation switched focus to Fred Goodwin’s “de-knighting”.

From an optimist’s perspective, one could argue that these are much more than empty gestures. Perhaps, The rebirth of accountability. And, with defiance towards unjustifiable bonuses and rewards taking their first scalps, you cannot help but think a precedent has been set for other CEOs, chairmen and executives to follow. But to be positively bleak, do we live in times of optimism?

With growth stagnating, unemployment at its highest rate since 1996, welfare reform threatening many of the most vulnerable in our society, this is hardly the time to count the odd million saved or a knight of the realm forfeiting an honour as wins. To take the less joyous path and reluctantly embrace pessimism, these somewhat positive events do not seem so significant in the cold light of day.

When it comes to real reform, where the agenda of responsible capitalism will ultimately succeed or fail, we will see whether there is real merit to the argument. Despite the term’s popularisation, in reality we find a contrasting picture. No truer than with regards to the Vickers Report, which advocated much needed regulatory reforms of banking. In December, this was tellingly confirmed to be off the table until the latter end of the decade, inexplicably being scheduled for 2019. In both a political and banking sense this is light-years away. And in all honesty, who knows what the future will bring? By 2019, the economy could be growing and the yesteryears of turmoil could be long forgotten, only for future generations to once again be blighted by further recessions.

With this in mind, in spite of the fanfare surrounding “responsible capitalism”, you cannot shake the feeling that far too many remain proponents of the notion that big business is impossible to regulate. Jonathan Bartley, writing last week for the Guardian, suggested that “responsible capitalism” is an oxymoron much like “well-mannered war”. While, this may be too cynical, there is a point here. A point perfectly articulated by gestures such as those seen in the past few days. Responsible capitalism has to mean more than simple pact mentality retribution and bonus blocking, to put it simply the idea must avoid being devalued, avoid becoming “responsible capitalism lite”.

To steer clear of such a fortune, we must be wary of finding ourselves in a rut, or continuous chain of events, where every now and again the public mood is defused with a token appeasement. Rather pressure must keep mounting, focus must not waiver and courage must form the basis of our approach.

Unquestionably, Ed Miliband has seized the initiative in the past week, and doubters must surely recognise the Labour leader’s growing ability to pick the fights worth fighting. As with Murdoch and NewsCorp, Ed has understood the public mood and capitalised to appear both earnest and true on his words concerning responsible capitalism.

The party must continue to walk this path. While, the much needed reform is scheduled for long into the political future, a future in which Labour hopefully once again form a majority, Labour and the left can still be influencing the debate now. Pushing a coherent agenda clearly defined by its goals and undeterred by nonsensical claims of angering big business. The message is clear, the public want action, Labour can and must deliver this.

This is a guest post by Kenneth Way

Wednesday 25 January 2012

European Court of Human Rights: Worth fighting for?

In his speech today in Strasbourg, David Cameron has argued Britain must use its chairmanship of the European Court of Human Rights to reform the court.

A move likely to appease the eurosceptic wing of his party, Cameron’s call is one which paints the ECHR as overly interventionist and an unwelcome party in national legal proceedings. But is this really the case? Or is the Prime Minister overstating the impact of the ECHR on British justice and in the process guilty of “peddling myths”?

To answer this, one must consider the charges the Conservative leader has brought against the ECHR. Addressing Strasbourg, Cameron focused on three criticisms in which he stated the court is a “small claims court”, transfixed with petty rulings rather than the substantial protection of human rights, argued it is bogged down by a 150,000 strong caseload and finally that the court delivers verdicts that unnecessarily undermine the authority of national courts.

For all too willing sceptics these arguments provide ample cannon fodder to push for wide-ranging reform that would reduce the backlog of cases, but much more importantly for anxiety ridden anti-Europeans limit the scope of the ECHR. With a growing concern that the court will push for the British ban on prisoner’s voting to be lifted, an issue which was incidentally subject of a Commons vote last year, governance of the court presents an ideal opportunity to counter a perceived threat to established national law.

But in contrast with claims being made from the right, statistics reveal that Cameron’s argument that Britain needs to be allowed to make more conclusive rulings is plain wrong. An excellent post on the Human Rights Blog shows that in reality, only 3% of cases the court considers regarding Britain receive a judgment. This hardly seems like the actions of an intrusive interventionist body in dire need of reform.

Perhaps more aptly, as Sadiq Khan MP has claimed, Cameron is “more concerned with placating his restless backbenchers than he is about protecting and promoting human rights across Europe.” Talk of the court undermining British law provides weight to this theory and in actuality with the majority of cases brought before the court arising from countries such as Russia, Romania and Ukraine, it seems difficult to envision Conservatives being overly fussed about the court imposing decisions on these states.

The criticism extends beyond the opposition though, with Britain once again being forced to the fringes in a supranational setting by a party seemingly hell-bent on nullifying European influence. As with the veto in December, the warning signs are plain to see. Prior to today’s speech the ECHR's most senior judge, Sir Nicolas Bratza QC, stated, “It is disappointing to hear senior British politicians lending their voices to criticisms more frequently heard in the popular press, often based on a misunderstanding of the court's role and history, and of the legal issues at stake.”

Unlike Cameron, Bratza’s viewpoint is statistically supported and it is imperative that any push for reform is grounded in a reality-based understanding of the court. This includes honesty about the statistics and a better articulation from supporters of the positive and necessary impact the court has and continues to have on the guarantee of human rights across the 47 signatories to the ECHR.

This is a guest post by Kenneth Way

He is writing ahead of the Fabian Society’s conference “Social Europe: Worth Fighting For?” which will take place on 25th February 2012. Amongst other things, the Conference will consider the issue of human rights in a European context.

You can buy your ticket, priced £10 for non-members or £5 for members/concessions here.

Friday 20 January 2012

Responsibility rhetoric: how Cameron is manipulating capitalism

As Andrew Neil noted on last night’s The Week, the word capitalism can no longer be used without an adjective prefixed to it. Responsible capitalism, fairer capitalism, better capitalism, moral capitalism and predatory capitalism are just a few of its personalities. Converting an adjective into convincing policy and tangible change was always going to be difficult. However Ed Miliband’s timely push for a different kind of capitalism is starting to be watered down by David Cameron’s subsumption of the same language.

The PM’s speech yesterday was criticised as being full of empty rhetoric about responsible capitalism. But it would be foolish of us to underestimate this as unintentional; David Cameron and his army of speechwriters did not forget to include a paragraph setting out specific ‘responsible’ policy. They will not have failed to realise that they will need policy to act upon if they are going to change capitalism. What he is doing is what we have seen them do to ‘tax-payer funded’ trade unions and the ‘benefit-scroungers’ of the welfare state: manipulating the notion of responsible capitalism to his advantage. The new capitalism that Labour has made the crux of their ideology is being made to look like an empty notion.

The government have clearly failed to take any substantial steps towards ‘responsible capitalism’ thus far. The Conservative-led government has cut corporation tax by 2%, scaled back and pushed back banking reform to 2019, failed to take any tough stance on capping high pay and watched while train fare increases far above inflation. “Let's judge you on your deeds and not your words” Ed Miliband rightly challenged David Cameron.

But speaking in London yesterday, David Cameron again failed to offer any tangible policies to show how he planned to work towards his responsible capitalism. Instead he set out an aim for a “socially responsible and genuinely popular capitalism. One in which the power of the market and the obligations of responsibility come together.” However the successful creation of a market that is both free and fair seems wholly unrealistic. To expect businesses to sacrifice profit in order to regulate their own ‘fairness’ is deluded. However deluded is something that we know Cameron is not; he has shown himself to be politically astute and carefully manipulative.

Tellingly, Chuka Umunna dismissed Cameron’s speech as “high on rhetoric and analysis but [with] a great hole in the middle.” But it is crucial that this is not just dismissed as a poor politics. Ben Jackson and Gregg McClymont’s pamphlet ‘Cameron Trap’ warns against such an underestimation of Labour’s adversaries. The Conservatives have been incredibly successful in framing the debate about austerity in their own terms, and leaving Labour to look internally fraught and self-contradicting.

So warning bells should have been ringing when Cameron presented responsible capitalism as a ‘nothing-idea’ of empty rhetoric. And, conveniently, a nothing-idea that’s completely compatible with free markets. What good luck.

This tactic will attract brief criticism for the government. However by using the same language as Labour, but using it in such a way that it means nothing, they will leave the opposition saying nothing. Labour should not underestimate their opponents, and must not let the notion of fair capitalism be made defunct by Conservative manipulation. They must be clear and vocal on the policy that their capitalism encompasses. Most importantly they must make it obvious that Cameron’s capitalism is not responsible, fair, better or moral.

This is a guest post by Georgia Hussey (@Georgia_Hussey), Fabian Society Publications Intern

Wednesday 18 January 2012

Any willing provider? Labour's anti-state chic

Steve Akehurst (@SteveAkehurst) takes a look at Labour’s multi-coloured movements in a review of The Purple Book and Tangled Up In Blue

Perhaps the most striking thing about the years following the economic collapse of 2008 was the absence of new ideas on the democratic left. Labour's election defeat confirmed for most that something had gone awry with modern social democracy. Most agreed that approaches to state and market had been ill struck, and that the economy had become too dependent on the City. But these axioms never gave birth to much in the way of renewal. All the while the Tories were stitching together their own story, re-casting the crisis as one of overspending and inefficiency, co-opting Britain's other allegedly centre-left party along the way.

It's amid this impasse in 2011 that Labour's multi-coloured insurgencies have emerged, offering their own readings of the past, present and future. Chief among them have been the Purple Book, organised by Progress, and Blue Labour. and the two actually started life closer than is often recognised. A number of the Purple Book's contributors and cheerleaders (e.g Caroline Flint, Tessa Jowell, Philip Collins) were involved in the first wave of seminars and publicity that gave rise to Blue Labour. They've since sensibly gone their own separate ways, but retain their shared starting point that the root of Labour's woes lay in becoming too centralist and remote; “administrative, elitist and technocratic”, as Rowenna Davis puts it. Both claim to be interested in returning to Labour's decentralising tradition, and both eschew 'big state' Fabianism, top-down universalism and public spending as the solution to all of societies' ills.

The Purple Book

The Purple Book approaches this argument in a considerably more slick, metropolitan way. At its best, it is far more thoughtful, practical and self-aware than many of its critics have given it credit for. It hangs together in a way few anthologies do, and is more astutely conscious of itself as an electoral strategy than its rivals. There are plenty of interesting ideas on the value of co-operatives as a means of spreading social control over public services and on revenue-raising at a local level.

The trouble with it is, at times, it feels like a new language is being adopted to advance a familiar agenda, which is essentially one of marketisation. The impression gained through the book is not of a central state endowing local communities, but of diversification and the state “letting go” as an end in itself. All this is fine if one believes in it, but it's difficult to know how it differs from the current government's 'any willing provider' approach to healthcare. Co-ops are in the mix and are to be encouraged, sure, but what of the potential for conflict between different providers? Surely a Co-Op couldn't hope to compete with private providers in terms of outcomes; does the state inherently privilege Co-Ops in the contracting process to balance this out? What are the rules applied when opening services to tender? What if no local group – or demand for co-operative control - emerges? None of these questions are ever really explored satisfactory, apparently lost to the contributors reforming zeal.

A similar frustration stalks you as you read the books' sections on political economy. Tristram Hunt's contribution is fantastic, by far and away the best of the bunch. It wisely focuses on 'pre-distribution' and the need for the state - in smart, considered ways - to get 'up stream' and shape a more equitable distribution of the benefits of growth, as opposed to simply redistributing through the tax system. But this bolder, hands-on approach with the market is never matched or built on elsewhere. The living wage, pay multiples, greater democratic organisation in the workplace, regional or national investment banks - all are examples of small, fairly inexpensive things that can be done to achieve the more balanced economy the book talks of, but nothing like it is ever touched on.

Throughout there is often simply an unwillingness to leave well-worn comfort zones and suggest anything that might appear 'anti-business' or 'old Labour'. Instead the book frequently retreats into public service reform, or constitutional issues, as if the past 5 years hasn't happened. At the end of the book, editor Robert Philpot lists its recommendations – there are around 10 pages on reforming the state, and just 1 on reforming the market. But what the UK has seen is surely not a failure of the big state, but the market – or at least, the state's relationship with it. How else to understand the financial crisis, or the de-coupling of growth from wages?

In short, it's not that 'leaving the big state behind' (the books' promotional strapline) feels like the wrong prescription for the UK's problems – it's that it's the wrong diagnosis. When Patrick Diamond argues that “social democrats need to acknowledge that state intervention has left a multitude of social and economic ills untouched”, he writes as if we've just experienced 30 years of post-war Keynsianism. Nor did Labour lose because it was too statist. Philpot triumphantly reveals 1 in 4 of Labour's lost voters saw 'government as part of the problem not the solution' – but what of the other 3 in 4? Nobodies arguing there's a thirst for a Soviet-style command economy, but there is room for a positive case to be made for the state in the market, actively shaping it not least so that it puts money in the pockets of ordinary, hard-working people. A brash anti-statism simply neglects the challenges of our time.

Tangled Up in Blue

A similar misreading pops up through the Blue Labour story. It holds at its heart the mantra that “relationships are transformative”; that organising local communities is the best means by which to achieve social change. But instead, to Glasman, Davis writes, “the modern Labour party...seemed obsessed with expanding the state”. This would be fine were it just a piece of posturing, but it leads Glasman to sweeping statements (“the model that we had in 1945 of universal state based [provision]... lead to massive erosion of solidarity”) which can in turn beget frustratingly rigid policy conclusions.

Take Sure Start centres. Blue Labour, says Davis, wouldn't open more of them, because it believes they've become “a means childcare” while both parents are at work, not of promoting relationships. Instead, Glasman wants the state to facilitate neighbours taking turns to look after each others kids. But Sure Start centres more often serve as a space where parents interact with and help other parents, picking up tips or sharing support as well as receiving it from staff. They foster exactly the sort of relationships that Blue Labour values in a more effective manner than ad hoc approaches. The idea that universal state services are always an anathema to social solidarity is simply false – as the public support the BBC or the NHS further shows.

This belligerence denies a more important, complicated conversation about when, where and how state services get it right in promoting relationship, and how they can change to get it right more often, rather than just cease. Here Davis tellingly notes that traditional social democrats were the only under-represented sections of the Labour party during Blue Labour's formative seminars - Sunder Katwala couldn't make it, and no Brownites were involved. It's difficult not to conclude that greater dialogue with the schools of thought Blue Labour sets up such antagonism to (particularly Fabianism) could give more nuance, and less divisiveness, to its conflict with 1945.
Yet there remains much to engage with about Blue Labour, and Davis convincingly argues that it has been received rather lazily by parts of the media (the reaction to Glasman's recent intervention serves as a case in point). Unlike both the Purple Book, and Philip Blond's Red Toryism, Blue Labour is rooted in a powerful critique of free markets, seeking to organise communities “against the dominance of capital”, on their high street and their workplace. This lends itself to plenty of thought provoking policy prescriptions. It has cogent ideas, for instance, on shifting the UK towards a more skills based economy, and its ‘a third, a third, a third’ model of public services (wherein, for example, a school would be run equally by the state, parents and staff) avoids a lot of the ambivalences of the Purple Book.

It's imperative that Fabians engage with the strength and weaknesses of these two books. Social democrats shouldn’t allow ourselves to be boxed in as reflexive defenders of the state. Not even the most ardent among us can deny that occasionally government ends up feeling top-down and transactive, or that services need to be shaped by those running and receiving them. Neither should we dismiss the power and energy of community activism as only to be harnessed for winning election campaigns; sometimes we need to govern in poetry, too. But there is an urgent need to push back against the bogeyman-esque depiction of the state that at times animates Purple Book and Blue Labour thinking. We need to articulate a vision of the state that's not in opposition to organised communities, but in constant partnership with them, providing a bulwark against the dominance of capital and the dysfunction and alienation which accompanies free market capitalism.

How’s that for a New Years resolution?

Monday 16 January 2012

The Economic Alternative - Ed Balls' Full Speech to Conference

Thank you to everyone who attended year's Fabian Annual Conference

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Ed Balls' speech to conference

Thank you Suresh and Andrew – and to all of you for coming along today and giving up your Saturday.

And let me start by saying – after over 20 years of attending the Fabian annual January conference – what a great honour it is to be invited to give the opening speech.

I first spoke at this conference in January 1993 – when I was a junior leader writer at the Financial Times.

It was a very different conference then – not the huge event it has become – with perhaps 100 or so people gathered at Ruskin College, Oxford, including among them the leader of the Labour Party, John Smith.

That conference was held the January after Labour’s election defeat in 1992 – an election in which the Labour opposition had failed to pass either of the two necessary political economy tests for electoral success:

- neither having a real alternative to the straitjacket of the Exchange Rate Mechanism, which could meet the aspirations of anxious voters on growth and jobs;

- nor a credible approach to tax and spending which could win public trust.

Ten months on from that defeat, as we met in Oxford, sterling had recently crashed out of a troubled ERM, the idea of the single currency as the solution for Europe was gaining momentum in Brussels, and here in Britain Labour’s ‘modernisers’ were trying to persuade John Smith that ‘safety first’ would not be enough.

And my contribution at that Conference?

To speak about my Fabian pamphlet, published a week or so before, which argued:
- that Labour could only win the argument for a radical alternative on growth and jobs if we had economic credibility;
- that neither the ERM nor the single currency could provide that credibility;
- and that the right approach for Labour and Britain was to make the Bank of England independent – a pretty controversial idea at the time.

I remember showing the pamphlet draft to my FT colleagues Martin Wolf and John Plender, who both said: right approach, very brave – but the Labour Party will never forgive you.


That 1993 Fabian Conference was held in the shadow of seminal events:

- German unification in Europe;

- Black Wednesday in Britain;

- a fourth election defeat for Labour.
And today’s conference – again to debate The Economic Alternative – is, without doubt, being held in the shadow of much greater and more defining events:

- political deadlock and an abject failure of economic leadership in the Euro area, Britain and the US Congress;

- following on from the biggest global financial crisis of the last century.
A toxic combination of grossly irresponsible bank lending, poor governance and weak regulation round the world which in its aftermath poses – as I have argued consistently over the last eighteen months – a threat to the world economy as grave as that which we faced in the depression of the 1930s.

So this is my starting point for today’s Conference.

If Britain and the world are to avoid repeating the mistakes of that 1930s ‘lost decade’ and the 2008 global crisis, then we badly needs political leadership in Britain, Europe and the world to meet two great challenges:

The Growth Challenge – to stop the aftermath of the financial crisis turning into years of slow growth, high unemployment and rising debts - leaving a permanent dent in our prosperity - and, The Reform Challenge – long-term reform to make sure such a financial crisis on this scale can never happen again and to build a stronger and fairer economic model for the future – what Ed Miliband has called a more responsible capitalism – which can, even in tougher times, meet our aspirations for social justice and strong public services.


But of course, there is another shadow which casts itself across this Conference today – a political shadow which presents a particular challenge to Labour.

I believe we are right to resist the ideological and ahistorical Tory analysis which tries to pin the blame for a global financial crisis on Labour’s approach to public spending – when it is clear that the global financial crisis bankrupted banks and pushed up deficits in high spending and low spending countries alike.

But it is a fact that this financial crisis did happen on Labour’s watch – and that Labour lost the subsequent General Election.

We have never denied that a plan is needed to get the deficit down, and that it would mean tough decisions on tax and public spending. Before the election, I set out £1 billion of cuts to education.
But as a party and a leadership, I said then and I still believe now that Labour should have been clearer before the election that if we had been re-elected there would have been spending cuts as well as tax rises.

And I have no illusions that there is a big task to turn round Labour’s economic credibility and show – even as George Osborne’s plans deliver unemployment rising, growth stagnating and long-term reform stalling – that Labour can be trusted again.

It is not enough simply to be right in our diagnosis of the Coalition’s failures and unfairness.
And it is not enough to set out a clear alternative – on growth, as we have with our five point plan for jobs; or on long-term reform of our economy, as Ed Miliband did this week and Chuka, Rachel and John Denham have too.

The challenge we face is both to set out a radical and credible alternative; and to win public trust for that alternative vision.


I referred to that January 1993 Fabian Conference.

Eighteen months later, in September 1994, just a few weeks after Tony Blair was elected Labour leader, and against the backdrop of stubbornly high youth unemployment, rising inflation and squeezed living standards, the Labour Party held a conference at the National Film Theatre on the new economy and Labour’s alternative.

As it happens, that conference was the occasion of the infamous ‘post neo-classical endogenous growth theory’ moment – which, for those who don’t know what it means, says that the rules of the game that the government sets on taxes, spending and regulation are not irrelevant to growth but can have a profound impact – for good or bad – on how the economy works.
Of course, those were very different times, and the policy debates of that time emphatically do not offer a blueprint based on the past when today we face such different economic and political challenges.

But the unspoken purpose of that 1994 conference – and its emphasis on Bank of England reform and fiscal discipline – was to address Labour’s economic credibility deficit, and dispel the idea that the party was addicted to the short-term, quick fix, vested-interest-appeasing solution to every problem.

I went back this week to look at the reporting of that conference - and in particular a preview piece in the Independent on Sunday with an anonymous briefing from ‘a senior party insider’.
The article started by saying Tony Blair and Gordon Brown will “ceremoniously ditch Labour’s traditional ‘tax, spend and borrow’ image this week, in a fundamental re-positioning of his party’s economic strategy.”

All under the headline… Labour Ditches Keynes.

As someone who had only recently studied ‘New Keynesian’ economics at Harvard, with Democrat Keynesians like Larry Summers and Republican Keynesians like Greg Mankiw, I must admit I was pretty appalled to see the greatest economist of the twentieth century traduced like that.

But the fact was that in the Monetarists versus Keynesians economic debates of the 1970s and 80s, the label ‘Keynesian’ had become - certainly in Conservative circles – a dirty word: profligate, irresponsible, statist, inflation-loving, not to be trusted.
A caricature that clearly could not be allowed to be a Labour caricature if we were to go on and win the 1997 election.

And what has been so striking to me over the past year listening to right-of-centre politicians and commentators – in Britain, America and Europe too – is how much the austerity debate has been used to try to reprise those old ideological divides.

Warn about the risks of deflationary fiscal policy – and that makes you a ‘deficit denier’.
Worry about the dangers of all countries trying to cut their deficits at once – and you are a ‘deluded Keynesian’.

Counsel that the world needs a plan for growth as well as deficit reduction – and you are ‘an irresponsible deluded Keynesian deficit

Keynes himself must be turning in his grave.

For, as has been fully documented in Lord Skidelsky’s biography, the real Keynes was no profligate tax-and-spender. He would have had no time for some of his disciples.
His seminal 1930 Treatise on Money was as hawkish on inflation as Milton Friedman decades later.

His attitude to irresponsible wage bargaining in the 1920s was as unforgiving as Margaret Thatcher in the 1980s.

Central bank independence? I think Keynes would have backed it - though not if his contemporary Montagu Norman was the Governor.

And as for the irresponsible and inflationary profligacy of the 1970s Tory Barber boom? He would have abhorred it.


But – and this was his great insight – Keynes also knew that economies could occasionally get stuck in a deflationary rut.

Although he called his famous book in 1936 ‘The General Theory’, it actually was not a general theory at all.

It was a description of what can happen in the unusual and special circumstances after a big financial crash – for him 1929, for us 2008 – when the ‘animal spirits’ of companies and consumers are so depressed that private spending stagnates.

When interest rates are so low that they can’t be cut any further.

When governments crudely cutting spending risks making deficits worse.
Of course, there will be naïve ‘Keynesians’ who will think it is always a special case – time to let rip and just ‘tax, spend and borrow’ in the hope that will deliver full employment – people who think we are always in 1930s-style depression and more borrowing is always the solution to unemployment.

And that is what gave Keynesianism a bad name in the 1970s.

It is why Labour leader Jim Callaghan was right to tell the Labour Party Conference in 1976 that that you can’t just spend your way to full employment.

But, as I argued well over a year ago now in my Bloomberg speech, the reason why the real Keynes is so relevant today is that the global economy has been sliding into that rare and dangerous ‘special case’ that Keynes identified in the 1930s and Japan suffered in the 1990s.
You either learn the lessons of history or repeat the mistakes of history.

With growth stagnating around the world, every country pressing ahead with deep cuts risks being a catastrophic mistake.

Which is why Ed Miliband and I have argued for a global plan for growth, with clear medium-term plans to get deficits down, but stimulus now to avoid a global slump too.

Rejecting the complacent isolationism of the 1930s and instead following Keynes’ lead by setting out a global solution to global problems – an economic alternative based on growth, job creation and balanced deficit reduction, which is the only sane way forward for Britain – and the only way back to credibility in the Euro area too.

Let us be honest: the Eurozone crisis is a catastrophe building week by week. And the pre-Christmas summit was a disaster for Europe and the Euro and for Britain too.
Europe’s leaders failed to back decisive action by the European Central Bank; they did not address the issue of the current fiscal straitjacket; and they still have no plan for jobs and growth

– hence the downgrades of the past 24 hours.
And did our Prime Minister bang the table and demand action?
No, he walked out and undermined our national interests as he did so.
Given the huge risks that the Eurozone crisis poses for Britain, we desperately need a Prime Minister and Chancellor who can lead in Europe.

But they can’t – and not just because their party won’t let them.

Because to do so means also admitting that they have got things wrong here in Britain too.
George Osborne and David Cameron took it as read that deep and immediate spending cuts and tax rises would at least serve the goal of deficit reduction – no matter how much Labour warned that going too far, too fast would be bad for borrowing as well as for jobs and growth.
The Chancellor claimed that public retrenchment would boost private sector confidence, investment and job creation. He called it ‘expansionary fiscal contraction’.

But this has turned out to be a false prospectus – a repeat of the discredited ‘Treasury View’ of the 1920s. Fragile consumer and business confidence has been crushed by the inflationary hike in VAT, the threatened withdrawal of public sector demand, the reality of falling incomes and the fear of rising unemployment.

And now the Government claim growth is stagnating because of the chilling effect of the Eurozone crisis – when our exports have actually been over performing compared with expectations, and it is weak domestic demand that has driven growth in the UK down, borrowing up and depressed long-term interest rates on government bonds.

Conservative ministers scoff at our five point plan for jobs and growth, saying ‘Labour’s proposal is to borrow even more’. But it is Chancellor George Osborne who is being forced to borrow billions more – £158 billion more than he planned.

Not borrowing to support the economy through difficult times and help get people back to work, but wasteful extra borrowing to pay for failure – the price of slow growth, rising unemployment and a bigger benefits bill.

Because every time George Osborne revises down his growth forecast, he has to revise down tax revenues and increase the benefits bill too.

Even the IMF has said that if our economy undershoots expectations and risks a period of stagnation, then the UK should slow down the pace of spending cuts and tax rises to get the economy growing again.

Just think: last autumn, many 16 year olds who would otherwise have stayed on at school have lost their Education Maintenance Allowances, and – following the abandonment of the Future Jobs Fund – many have gone straight onto the dole, adding to the more than 1 million young people now unemployed in our country.

On the surface of things, cutting EMAs and the Future Jobs Fund saved money and reduced borrowing.

But at what cost? How much more will it cost our society and our economy to leave those young people long-term unemployed and unproductive; they and their children receiving benefits rather than paying taxes and contributing to the national wealth?

If we do not invest now in jobs and growth, if we let a year of economic flat-lining become a decade of stagnation, what price will our country pay in the long-term?

That is why to meet the Growth Challenge and get the deficit down we are right, as we have set out in the five point plan for jobs, to call for temporary tax cuts and investment in jobs and growth – to stop a decade of slow growth and higher debts becoming a self-fulfilling prophecy.
Action now for growth, jobs and reform which does not conflict with the need for a credible medium term plan on the deficit, but which reinforces it.


But changing times also demand new and long-term reforms to re-shape our economy for the future.

As Ed Miliband argued earlier this week, we will need long-term reforms of our economy to boost growth and deliver social justice in straitened times.

And here again, the words of Keynes writing in The General Theory in 1936 are instructive: “Speculators may do no harm as bubbles on a steady stream of enterprise” he wrote.
“But the position is serious when enterprise becomes the bubble on a whirl-pool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”

Keynes was right then and now – we cannot simply let markets, in which speculators spend their time chasing one another’s tails, dictate important investment decisions and set the benchmark for what is fair and unfair.

Unregulated capitalism is not only unstable; it is inherently short-termist too.

So just as the current coalition are wrong to reject the insight of Keynes based on his experience of the 1930s, we must, as Ed Miliband has said, learn the lessons of the past three decades and meet the Reform Challenge:

- tougher financial regulation and new capital standards with financial stability at the heart of economic policymaking and banking reform to make sure that the needs of small businesses are addressed, including examining the case for a National Investment Bank;
- stronger corporate governance to make sure decisions are taken in the long-term interests of wealth creation and jobs, not the short-term interests of traders, speculators and their chums;
- government action to back business and ensure markets work for the long-term, including tougher competition rules, tax incentives for long-term investment, research and development and skills;
- and a youth jobs guarantee with tough rights and responsibilities

- and an expectation that every young person would take up work or training.


This is the Economic Alternative:

- to meet the Growth Challenge: short term action now to support jobs, growth and get deficits down;

- to meet the Reform Challenge: long-term reform to tackle short-termism and instability and support long-term investment, growth and fairness.

But to make that alternative work and be credible, it must be underpinned by a clear commitment to balanced but tough spending and budget discipline now and into the medium-term.

The question for Labour has never been about ‘whether’ to get the deficit down but ‘how’ and ‘when’, who carries the greatest burden, and what kind of country we leave behind for our children.

And while we would not have started from here – a fairer and more balanced approach to deficit reduction would not have choked off recovery and thrown borrowing plans off track – we are where we are.

As Ed Miliband and I have said for months this government’s failure means the next Labour government will inherit a substantial deficit
that we will have to deal with.

After just 18 months, the government’s autumn statement admitted that it will not balance the books by 2015 – the promise that was the cornerstone of the coalition.

And George Osborne has had to admit that he will now have to borrow more than the plan Alistair Darling set out before the election – because of the slow growth and higher unemployment his reckless plan has delivered.

This represents a big challenge for Labour, as Ed Miliband made clear earlier this week. As I said at Labour’s annual conference, we will set out before the next election tough fiscal rules that the next Labour government will have to stick to – to get our country’s current budget back to balance and national debt on a downward path.

In our manifesto we will commit to do the responsible thing and use any windfall gain from the sale of the government’s stakes in RBS and Lloyds to repay the national debt – not for a giveaway.

And, however difficult this is for me, for some of my colleagues and for our wider supporters, we cannot make any commitments now that the next Labour government will reverse tax rises or spending cuts. And we will not.

Because we don’t know how bad things will be on jobs, growth and the deficit. But we do know that the next Labour government will have to sort out the deficit where this government failed and deliver social justice in tougher times.

And as we make the argument that cutting spending and raising taxes too far and too fast risks making the economy and the deficit worse not better, it is right that we set out where we do support cuts and where we would be making the tough but necessary decisions.
In education, as I have said, £1 billion of cuts – but not the biggest cuts to schools since the 1950s. In policing, 12 per cent cuts to budgets – but not 20 per cent cuts which will hit the frontline hard and see 16,000 officers lost. In defence, £5 billion of cuts – but not a strategic defence review that raises more questions than answers.

And because as progressives we believe in the role of the state and public services to do good, it is vital that we are even tougher on waste than our political opponents – whether that is the £2 billion being wasted on a reckless reorganisation of the NHS, billions being lost in tax avoidance or the waste of mass unemployment.

Times will be tough – we will have no choice but to make difficult choices.
Let me give you one example.

Pay restraint in the public sector in this parliament would have been necessary whoever was in government.

But George Osborne’s economic mistakes mean more difficult decisions on tax, spending and pay. It is now inevitable that public sector pay restraint will have to continue for longer in this parliament.

Labour cannot duck that reality. And we won’t. Jobs must be our priority before higher pay.
That said, there are important issues on incomes, pay and pensions that George Osborne must get right.

We will continue to press for fair pay and fair pensions reform while defending the vital role the national pay review bodies play in delivering discipline, reform and fairness.

We believe the 3p in the pound rise in pension contributions should never have been imposed without negotiation.

And it is wrong and unfair to penalize those on low and middle incomes by cutting tax credits, hitting women harder than men and families with children hardest of all.

But pay discipline in the public and private sector needs to be accompanied by fairness.
That is why the government should also ask the pay review bodies to deliver the 1 per cent average settlement cap in a fair way – being tougher to those at the top in order to offer more protection to those at the bottom.

Pay also needs to be fair in the private sector, where there have also been tough decisions – with real pay in the private sector falling around 3% in the last year. But for those at the top boardroom salaries in FTSE 100 companies have increased by 50% in the past 12 months.

That is why Ed Miliband has rightly called for reforms to ensure that rewards at the top better reflect the success people achieve and the contribution they have make to our economy. David Cameron has now started to talk the talk on this issue, but he now needs to take the action we have been calling for.


Let me finish by returning to the politics.

Because it would be naïve for anybody to think that the government’s deepening economic failure will automatically translate over the coming months into success for Labour.

And the question the public will of course ask is: who can we trust?

Credibility is based on trust and trust is based on honesty.

And let’s be clear: the Tories won’t own up either to the scale of the challenge or the failure of their plans.

They claim Britain is a safe haven… when our low long-term interest rates are not a sign of enhanced credibility but a reflection of stagnant growth in our economy, as it was in Japan in the 1990s.

And they claim we’re all in it together… when middle and lower income families, women and young people are hardest hit, and the pain is only now beginning.

So with determination and vigour – loud and direct – we must expose day by day the huge gulf between what Coalition ministers say and the truth.

But we must be honest with the British people that under Labour there will have to be cuts, and that – on spending, pay and pensions – there will be disappointments and difficult decisions from which we will not flinch.

But honesty does not mean going along with a failed Conservative plan because it is easier in the short-term. We tried that when Labour supported the disastrous decision to join the ERM and stuck with a failing policy right up until September 1992.

I have heard much advice over the past year from people who admit that combining stimulus now to get the economy moving with a tough but balanced medium-term deficit plan may be good economics – but who argue that it is bad politics because it is ‘out of tune’ with the public mood.

But that is not honest politics either.

Now is not the time to stand aside, bite our collective lip while this government and Euro area governments make historic and terrible mistakes.

I do believe that we have both a duty to make the right argument on growth and jobs – even if this has put us outside the consensus for a time.

And I do believe this is an argument we can win.

Now is the time to hold our nerve.

To make the case for The Economic Alternative.

To speak up for the people we seek to represent and the values that we stand for.
And to do so in a typically Fabian way – steady, step by step, determined, credible and radical in our vision for a better and fairer future for Britain.

Thank you.